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PETITIONER: M/S. NORTHERN INDIA IRON & STEEL CO ETC. A

       Vs.

RESPONDENT: STATE OF HARYANA & ANR

DATE OF JUDGMENT10/11/1975

BENCH: UNTWALIA, N.L. BENCH: UNTWALIA, N.L. RAY, A.N. (CJ) MATHEW, KUTTYIL KURIEN

CITATION:  1976 AIR 1100            1976 SCR  (3) 677  1976 SCC  (2) 877  CITATOR INFO :  R          1989 SC1030  (5,7)

ACT:      Electricity  (Supply)  Act,  1948-"Demand  Charge"  and "Energy Charge"-How calculated in terms of power cut.

HEADNOTE:      The State  Electricity Board had framed, in exercise of its power under s. 49 of the Electricity (Supply) Act, 1948, certain terms and conditions and, the procedure in regard to supply of  electricity to  its. consumers. For big consumers the  system   of  tariff   is  the  two-part  tariff  system comprising of  (1) Demand  charge and  (ii) Energy charge. A "Demand charge"  means the  amount chargeable  per month  in respect of  the Electricity  Board’s readiness  to serve the consumer irrespective  of whether  he consumes any energy or not and is based upon certain factors. "Energy charge" means the charge  for energy actually taken by the consumer and is applicable to  the units  consumed by him in any Month. This was in addition to any demand charge, if applicable.      A schedule of tariff of energy was framed by the Board. Cl. 4(b)  mentions how  the monthly  demand charge  shall be calculated and  sub-clause (f) of this clause states that in the event  of lock-out,  fire  or  any  other  circumstances considered by  the supper  to be  beyond the  control of the consumer, the  consumer shall be entitled to a proportionate reduction of demand charges/minimum charges.      As a  result  of  shortage  of  electricity  the  State Electricity Board  considerably  restricted  the  supply  to large industrial concerns. Because of this the Board allowed some reduction in the demand charges. The appellant, who was a bulk  consumer of  electricity, could  not  get  the  full quantity as  per  the  contract  between  the  parties.  The appellant, therefore,  filed  a  writ  petition  that  there should be either no demand charge at all. when the Board was not in a position to supply electric energy, or there should be a  proportionate reduction of the demand charge. The High Count noted  the reduction  made by  the Board and held that the Board  was entitled  to the  demand charge.  It did Dot, however decide  as to  what should  be the  basis for and in what proportion  the demand  char o  should be  reduced. The

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appellant also  contended that  no duty  was lovable  on the demand charge, under the Punjab Electricity (Duty) Act, 1958 but only  on the  energy charge,  for the  actual amount  of energy supplied but the High Court rejected this contention.      Allowing the appeal in part on the first contention, ^      HELD: (1)  The circumstance of power cut which disabled the Board  to give the full supply to the appellant would be a circumstance  which disabled  the consumer  from consuming electricity as  per the contract and this was a circumstance which was  beyond it  control and  could not  be  considered otherwise by  the Board.  It  entitled  the  consumer  to  a proportionate  reduction   of  the   demand  charge.   In  a circumstance like  this the  obligation of  the  consumer  o serve at  least 3  days’ notice  on the  supplier as per the later part  of sub  clause (f)  was  not  attracted  as  the requirement of  the notice was only in the case of shut down of not less than 15 days’ duration [682 A, B, C]      Therefore,  the   inability  of  the  Board  to  supply electric energy  due to  power cut  as per the demand of the consumer according  to the contract will be reflected in and considered as  n circumstance  beyond  the  control  of  the consumer which  prevented him  from consuming electricity as per the  contract to  the extent it wanted to consume. [682, D] 2-L159SCT/76 678      (2) A  reading of the clauses of the Schedule of tariff as a whole makes it clear that the duty under the Punjab Act is chargeable  on the  price of  energy supplied in a month. Therefore, the  duty is  chargeable not  only on  the energy charge but  also on  the  demand  charge.  It  is,  however, chargeable on  the actual amount of demand charge realizable from the consumer.

JUDGMENT:      CIVIL APPELLATE  JURISDICTION: Civil  Appeal Nos. 1306, 1310, 1370-1380 and 1422 to 1424 of 1975.      Appeals by  special leave  from the judgment and orders dated the  9th July  1975 of the Punjab & Haryana High Court at Chandigarh  in Civil  Writ Petitions  Nos. 733, 595, 725, 681, 720,  723, 726,  728, 777, 780, 781, 833, 892, 884, 885 and 887 of 1975 respectively.      M. C.  Bhandare, (In 1306) and Mrs. S. Bhandare for the appellants in C.As. 1306, 1370-1980 and 1422-1424 of 1975.      F. S. Nariman, A. K. Srivastava and B. P. Singh for the appellants in C.A. 1310.      A. K.  Sen, (In CA 1306), Dr. L. M. Singhvi, (In 1310), K. K.  Jain, Bishamber Lal, S. K. Gupta and P. Dayal for the Respondent No. 2 in all the appeals.      L. N.  Sinha, Sol.  General (In CAs. 1306 and 1310) and R. N. Sachthey for Respondent No. 1 in all the appeals.      The Judgment of the Court was delivered by      UNTWALLA, J-In  these  appeals  by  special  leave  the common question  for determination  is whether  the  Haryana State Electricity  Board (brieny, the Board), respondent no. 2,  is   entitled  to  claim  any  demand  charge  from  the appellants in  respect of  the supply  of electric energy to them and  whether the  State of Haryana, respondent no. 1 is entitled to  charge any  duty under  the Punjab  Electricity (Duty) Act,  1958 on  the demand  charge. Several  connected Writ Petitions  were disposed of by the High Court of Punjab & Haryarna  by a  common Judgment  and  this  judgment  will

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govern all the cases which had been heard together by us.      Civil Appeal  No. 1306/1975  is by  M/s Northern  India Iron &  Steel Co.  Ltd. and  arises out of Writ Petition No. 733/1975. We  may state  a few necessary facts of this case; those of  the other  cases being  more or  less similar. The appellant owns  a factory  and manufactures  alloy steel and steel castings.  It  is  a  large  consumer  of  electricity supplied by  the Board.  As per  the  contract  between  the appellant and  the board  be total  connected  load  of  the installation in  question is  8687, 649  Kilowatts  and  its contract demand  is the  same. At  the ratio  of one K.V. to 0.85 KW, the corresponding K.V. Of the contract demand works to 10,221  K.V. The appellant was allotted 1,06,590 units on daily basis  as its  power quota  by the  Board.  There  was shortage of  electric energy  in the  State of  Haryana. The State Government,  there are,  issued orders  and directions for  maintaining  the  supply  and  securing  the  equitable distribution of  the energy. Orders were issued by the State Government under section 679 228 of  the Indian  Electricity Act, 1910-hereinafter called the 1910  A Act,  restricting  considerably  the  supply  of electric  energy  by  the  Board  lo  the  large  industrial consumers as  a result of which power cut was introduced. It is not necessary to give the facts and figures of the amount of power  cut, suffice  it to  say that at the relevant time there were  substantial power cuts and the appellant was not able to get supply of energy according  to demand as per the quantity mentioned in the contract. In these circumstances a dispute arose  between the  parties as  to whether the Board was entitled to get any demand charge, if so to what extent, and whether  the State could demand any duty on such charge. Under Section  49 of  the  Electricity  (Supply)  Act,  1948 hereinafter called  the  1948  Act,  the  Board  may  supply electricity to  any person  not being  a licensee  upon such terms and conditions as the Board thinks fit and may for the purposes of such supply frame uniform tariffs of course, the power of the Board is subject to the other provisions of the Act and regulations, if any made in this behalf      There are  two well-known systems of tariffs-one is the flat rate  system and  the other  is known  as the  two-part tariff system.  Under the  former a  flat rate is charged on unit of  energy consumed. The letter system is meant for big consumers of  electricity and  it comprised  of  (1)  demand charges to  cover investment,  installation and the standing charges to some extent and (2) energy charges for the actual amount of  energy consumed. The Board has framed in exercise of its  power under section 49 of the 1948 Act certain terms and  conditions   and  procedure  in  regard  to  supply  of electricity to  its consumers.  They are  applicable in  the cases of the appellants also. Demand Charge has been defined in clause 1(h) thus:           "Demand charge"  shall mean  the amount chargeable      per month  in respect of Board’s readiness to serve the      con summer  irrespective of  whether  he  consumes  any      energy or  not, and  is based  upon the connected load,      the maximum  demand or the contract demand, as the case      may be  and as  prescribed in  the relevant schedule of      tariff. And in sub-clause (1) "Energy Charge" has been defined thus:           "Energy charge"  shall mean  the charge for energy      actually taken by the consumer and is applicable to the      units consumed by him in any month. This is in addition      to any demand charge, if applicable. A schedule  of tariff  for supply of energy which is amended

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from time  to time  has  been  framed  by  the  Board.  Such schedule of  tariff for  steel furnace power supply mentions in item  2 the  character of  service. Clause 3 provides for tariff and  clause 4  deals with  the demand assessment. The two part  tariff mentioned  in  clause  3  in  case  of  the appellant was  "Demand Charges  Rs. 12/-  per KVA  per month PLUS Energy  charges Rs. 7.00 passe per Kwh". There was some surcharge on  the above  rates. The  relevant Sub-clauses of clause 4 i.e., Demand Assessment may now be quoted here: 680           "(a) The demand  for any month shall be defined as                the highest average load measured in Kilovolt                amperes during any consecutive minutes period                of the month.           (b)  The monthly  demand charges shall be based on                (1) the  actual  maximum  demand  during  the                month or  (ii) 65%% of the contract demand or                (iii)  75%  of  the  highest  maximum  demand                during the  preceding eleven  months or  (iv)                100 KVA  whichever is  the highest.  For  the                first 11  months  from  the  commencement  of                Supply  alternative   (iii)  shall   not   be                applicable.           (c)  The contract  demand means  the maximum  K.W.                KVA  for   the  supply  of  which  the  Board                undertakes to provide facilities from time to                time.           NOTE-In case  the consumer  exceeds  his  contract      demand in  any month  by more than 71/2% a surcharge of      25 %  will be levied on the SOP/Monthly minimum charges      (industrial, Factory lighting and colony supply).           (d)  If in  any case  the maximum  demand is being                measured in  KW the  same shall  be converted                into KVA  by the  use of  actual power factor                and KVA  tariff applied  for working  out the                demand charges.           (e)  In  case   the  supply   has  been  given  on                restricted hours  basis then  a reduction  of                30% in demand charges will be given if supply                is for  12 hours  or less,  occasional  break                downs or  shut downs  if any,  on the part of                the supplier,  shall, however,  not entitle a                consumer to any reductions.           (f)  Force Majeure: In the event of lock out, fire                or and  other circumstances considered by the                supplier to  be beyond  the  control  of  the                consumer the  consumer shall be entitled to a                proportionate     reduction     of     demand                charges/minimum charges provided he serves at                least 3  days notice on the supplier for shut                down of not less than 15 days duration.      It appears  from the  judgment of  the High  Court that some reduction  (perhaps upto 60%) was given by the Board in the demand  charges because of the inability of the Board to supply energy  as  per  the  requirement  of  the  appellant consumers due  to power  cuts imposed by the Government. But the appellant  seems to  have taken  the stand  that  either there should  be no  demand charge at all when the Board was not in  a position  to supply  electric  energy  as  per  is requirement or  there should be a proportionate reduction of the demand  charge. Hence it filed a Writ petition. The High Court has noted the reduction made by the Board and has held that the  Board is  entitled to  the demand  charge. It has, however, not been 681

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decided as  to what  should be  the basis  for and  in  what proportion the demand charges be reduced.      The stand  of the  appellant as  respects the charge of duty by  the State  Government under  the Punjab Electricity (Duty) Act,  1958-hereinafter called  the Duty Act, was that no duty could be levied on the demand charge. The High Court has repelled this contention.      The two questions which fall our determination in these appeals are:           (1)  Whether on the facts and in the circumstances                of the  cases the  Board is entitled to claim                any demand charge; if so, to what extent?           (2)  Whether any  duty is  leviable on  the demand                charge; if so, to what extent ?      An  argument  was  advanced  before  us  in  the  first instance by counsel for the appellants with reference to the definition of  the demand change in clause 1(h) of the terms and conditions  of supply framed by the Board that since the Board was  not ready  to serve the consumer and the consumer was ready  to consume maximum electric energy the former was not entitled to ask for any demand charge. This argument, in the beginning was combated with equal force, if not more, on behalf of  the Board  and it was asserted that the Board was entitled to  assess and  claim the full demand charge as per clause 4  of the  tariff irrespective of the fact whether it was in  a position  to supply  the energy  according to  the demand of  the consumer  or not.  Such an  extreme stand  on either side  appeared to  us a  bit puzzling  and leading to inequitable results.  The difficulty  was not easy to solve. If we  were to hold that for the Board’s inability to supply a fraction  of the  consumer’s demand as per the contract it could claim  only the  energy  charge  and  not  the  demand charge, it  would have  been very  hard and injurious to the Board and  the consumer  would have  unjustifiably  got  the supply at a very cheap rate If on the other hand, we were to say that  the consumer  was liable  to pay the entire demand charge as  per the method of assessment provided in clause 4 of the  tariff even  when for  no fault  of it, it could get only a  fraction of  its demand  fulfilled, resulting in its not being  able to run the industry to its full capacity, it would be  liable to  pay a  huge amount  per month, and this will not only be uneconomical but would seriously affect its economic structure.  But we  were happy to find that a just, equitable and  legal solution of the difficulty was provided during the course of the argument on either side and that is with reference  to sub-clause (f) of clause 4 of the tariff. It is, therefore, not necessary to resolve the extreme stand taken on either side.      Under  clause  4(f)  the  consumer  is  entitled  to  a proportionate reduction  of demand  charges in  the event of lock-out, fire  or any other circumstances considered by the supplier beyond the control of the 682 consumer; that  is to  say, if  the consumer  is not able to consume  any   part  of  the  electric  energy  due  to  any circumstance beyond  its control  and which is considered by the Board  to be  so, then  it  shall  get  a  proportionate reduction in  the demand  charge. The  circumstance of power cut which  disabled the Board to give the full supply to the appellant because  of the Government order under section 228 of the  1910 Act,  undoubtedly would be a circumstance which disabled the  consumer from consuming electricity as per the contract. And  this was  circumstance which  was beyond  its control and  could not be considered otherwise by the Board. It entitled the consumer to a proportionate reduction of the

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demand charges.  This interpretation  of  subclause  (f)  of clause 4 of the tariff was accepted to be the correct, legal and equitable interpretation on all hands. In our opinion it is so.  In a  circumstance  like  this,  it  is  plain,  the obligation of  the consumer  to serve at least 3 days notice on the supplier as per the latter part of sub-clause (f) was not attracted,  as the requirement of notice was only in the case of shut down of not less than 15 days duration.      We are,  therefore, of  the view  that the inability of the Board  to supply electric energy due to power cut or any other circumstance  beyond its  control as per the demand of the consumer  according to the contract will be reflected in and considered  as a  circumstance beyond the control of the consumer which  prevented it  from consuming  electricity as per the contract and to the extent it wanted to consume. The monthly demand charge for a particular month will have to be assessed in  accordance with  sub-clause (b)  of clause 4 of the tariff and therefore from a proportionate reduction will have to be made as per sub-clause (f). We hope, in the light of the  judgment, there will be no difficulty in working out the figures  of the  proportionate reduction  in any  of the cases and  for any  period. In  case of  any  difference  or dispute as  to the  quantum of  the  demand  charge  or  the proportionate reduction,  parties  will  be  at  liberty  to pursue  their   remedy  as  may  be  available  to  them  in accordance with law.      Coming to  the question  of duty, we have no hesitation in an  out right  rejection of  the extreme  contention  put forward on behalf of the appellants that no duty is leviable at all  on the  demand charge. But it is clear, and this was fairly conceded  to by  the Solicitor  General appearing for the State  of Haryana,  that the amount of duty payable will be on the actual amount of demand charge realisable from the consumer after the proportionate reduction under clause 4(f) of the tariff.      Section 3  of the  Duty Act  says that  there shall  be levied and  paid to  the  State  Government  on  the  energy supplied by  the Board to a consumer a duty to be called the "electricity duty",  computed at  the rates indicated in the various  clauses  of  sub-section  (1)  of  section  3.  The expression used  in the various clauses is "where the energy is supplied" to a particular type of consumer, then the rate of duty  will be  as specified  therein. On the basis of the said expression  the argument  put forward  on behalf of the appellant was  that the  duty could  be levied  only on  the energy charges for the actual amount of energy 683 supplied. Such  an argument  is too  obviously wrong  to  be accepted.   Reading the  clauses as a whole it would be seen that the  duty is chargeable on the price of energy supplied in a  month. The price of energy in a two-part tariff system would mean  and include the energy charge as also the demand charge. This  is  made  further,  clear  by  the  manner  of calculation provided  in Rule  3 of  the Punjab  Electricity (Duty) Rules, 1958. Sub-rule (1) says:           "The duty  under clause  (iii) and  (iv)  of  sub-      section (1) of section 3 of the Act shall be calculated      on the  price of the energy recoverable at the net rate      of the  Board which will include the demand charge when      the Supply is governed by a two-part tariff."      It is  therefore, manifest that the duty under the Duty Act is  chargeable not only on the energy charge but also on the demand  charge when  the supply  is governed by two-part tariff and  it is  chargeable on the actual amount of demand charge realisable from the consumer

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    For the reasons stated above, we allow these appeals in part to  the extent indicated above. In the circumstances we shall make no order as to costs in any of the appeals. P.B.R.                               Appeals partly allowed. 684